Whether you’re new to real estate investing or looking to transition from property rehabs to new build projects, finding the right piece of land for building an investment property is critical to success. If you’re wondering what separates a lot of land from a great land investment opportunity, you’ve come to the right place.
Below, we’ll discuss the benefits of buying land for ground-up construction and things to consider. We’ll also provide tips when searching for the right piece of land to build an investment property.
Below, we’ll discuss the benefits of buying land for ground-up construction and things to consider. We’ll also provide tips when searching for the right piece of land to build an investment property.
Let’s dive in!
The Benefits of Buying Land as an Investment to Build
There’s a reason there has been a significant increase in land investments over the last ten years. Buying land and building on it provides several benefits for investors, including more say in home designs and less competition.
Let’s look at the four biggest benefits of buying land for building investment properties:
Let’s look at the four biggest benefits of buying land for building investment properties:
- Customization: A ground-up home construction allows you to personalize a home to fit the unique needs of your target market. Whether it’s open floor plans, energy-efficient amenities, or implementing the latest design trends that will boost resale value, you have full autonomy over the look and feel of your investment property.
- Lower Maintenance: If you are building an investment portfolio with long-term rentals, new construction on land investments can simplify year-round landlord duties. New construction homes are built to meet the requirements of the latest building codes. Additionally, new builds with the latest technology and new appliances create fewer risks for major repairs.
- Lower Energy Costs: Millennials and Gen Z homebuyers are looking for affordability and sustainability. By constructing an investment property from the ground up, you can meet both needs with the latest energy-efficient appliances and amenities.
- Low Competition: The fix and flip market is highly saturated and competitive. However, with the US housing inventory still short by more than 4 million homes, investors have a unique chance to meet consumer demands for homes in a less competitive market with more opportunities.
Considerations when Building an Investment Property
Despite the benefits, buying land and building investment properties can be complex. One misstep or overlooked consideration can spell disaster for your returns and bank account.
With that in mind, let’s look at some of the more important factors to consider before purchasing a land investment property:
With that in mind, let’s look at some of the more important factors to consider before purchasing a land investment property:
- Property Taxes: Property tax rates can fluctuate significantly from state to state and city to city. Before purchasing any building investment property, it’s best to educate yourself on different areas’ annual property taxes and rates.
- Zoning Laws & Issues: Like property taxes, zoning laws vary by state and city, and can limit the kinds of buildings that can be constructed on a lot of land. These laws determine how the land can be used. Meet and communicate with local zoning agencies and officials to learn what is and isn’t acceptable, and any other requirements that may hinder your investment strategy.
- Physical Characteristics: Does a lot have access to roads? Is it in a flood zone or wetland? Even the most beautiful scenery can be a poor land investment if its physical characteristics make it unlivable.
- Utilities: Are utilities available and accessible to the lot of land? Unlike fairly populated regions, rural land areas may not have access to necessary utility services, like electricity, water and sewage lines, or a septic tank. Getting financing from a lender for these things may be difficult as installing a septic system, drilling a well for water, or installing a power line are extremely costly and time-consuming.
Tips for Finding Good Land Investments
Below, we’ve included a few additional tips to help you succeed in your land investment search:
- Research: Finding the right piece of land for building an investment property can be challenging without proper research. There are several resources available online for finding investment land for sale. The Realtors Land Institute is a good place to start. This organization offers listings of different land investment properties with tools to find accredited land experts in your area. When looking at a potential land investment opportunity, it’s best to take a deep dive into the land and ownership history. Look to local government websites or pay a real estate law office to conduct a thorough title search on the land. This research will help you avoid unforeseen land disputes and ensure you’re legally purchasing all of the land listed for sale.
- Build a Trusted Team: Any real estate investor will tell you that success is a lot easier with a team of essential real estate professionals by your side. Trusted and skilled real estate agents and contractors can provide new-build investors building investment properties with expertise and peace of mind.Look for agents with an Accredited Land Consultant (ALC) designation. ALC real estate agents operate within the land investment space and are experts at knowing your must-haves in terms of location and scope. These agents know exactly what lenders require to fund a construction project (access to paved roads, utilities in place, etc.) and can simplify your search and investment strategy planning. With the right builder, constructing your home can be the best part of the process. If you don’t already have a builder, look for those with a history of successful builds. If they’re local, ask if you can visit some of the homes they’ve recently built to find out if past clients are happy with their properties. This will also allow you to review their craftsmanship.
- Find the Right Capital Partner: Whether you’re just starting out or are a seasoned investor, having a reliable and flexible capital provider is essential for building an investment portfolio. Lenders operating in the private sector are free from restrictive governmental oversight and regulations–unlike banks and credit unions. They possess the freedom, speed, and adaptability to help land investors succeed. By finding and securing a formidable and knowledgeable private lending partner, you can streamline each aspect of the home-building process.
Building an investment property can be a highly lucrative yet challenging endeavor. By taking key factors like property taxes and zoning laws into consideration, adequately researching the land investment markets, building a team of trusted and skilled professionals, and finding the right capital partner, investors can simplify and streamline the new building process–positioning themselves and their real estate portfolio for success!
FACo: Helping Investors Find Success in Land Investment
Finance of America Commercial (FACo) offers the most reliable and flexible short-term loan options on the market. As a premier ground-up construction lender, we pride ourselves on providing investors with the flexibility, reliability, and capital necessary to acquire land, build investment properties, and sell with success.
FACo’s short-term New Construction Loans provide investors with:
FACo’s short-term New Construction Loans provide investors with:
- Up to 100% construction costs
- Financing available in 44 states
- 1-4 non-owner occupied unit residential, townhome, and condo eligibility
If you’re looking to capitalize on the best land investment opportunities to build profitable investment properties, let FACo be your capital partner. Schedule a FREE consultation today by CLICKING HERE.
